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Brexit - establishing a business in the Netherlands

Frequently asked questions - Brexit - establishing a business in the Netherlands

How will Brexit affect my company?

Between 31 January 2020 and 31 December 2020, there was a transition period for companies and other organisations in order to have more time to prepare for the new rules as of 2021. There was still free movement of people and goods. For holidaymakers to and from the UK, for example, nothing changed, and it was not necessary for customs to check a lot of British goods. The rights of Dutch citizens living in the UK also remained the same during the transition period.

This transition period has now expired. Because financial services do not form part of the new partnership, a no-deal Brexit applies to financial institutions. British financial institutions without a licence may no longer offer their services in the Netherlands from 1 January 2021. This can have consequences for their customers based in the Netherlands if British parties do not have a licence in the Netherlands. They actually have to discontinue their services.

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If Brexit will affect my company, what should I do now?

If you think that Brexit will affect your company, you should analyse the consequences of Brexit. For example: a license requirement or a possible exemption from licensing. If necessary, you will have to submit a new licence application to the AFM.

It may also be the case that your company will need to obtain a licence from the supervisor in the United Kingdom or that you qualify under the temporary permissions regime. If this is the case, you should contact the UK supervisor (the FCA) as soon as possible.

Your clients may also experience consequences as a result of the changes to your company. Provide them with clear information.

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What exactly does the licence application procedure at the AFM entail?

You can apply for a licence via our AFM Portal. The AFM’s response time will be 8, 13 or 26 weeks, depending on the type of organisation and licence involved. The AFM may suspend the application procedure if the application is incomplete, meaning that the processing time of an application may take significantly longer in practice than the statutory term. The quality of the application and the response time of the applicant to questions from the AFM will also significantly affect the processing time. Our website provides more information on the various licences and licence applications for each type of organisation.

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Is there an exemption applicable to investment firms from the UK due to Brexit?

This exemption has ended per 1 January 2021.

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How can I talk to the AFM to find out what I need for a licence?

For the AFM, it is important that you yourself, either assisted by an adviser or not, analyse what Brexit means for your company and the information you need to provide with a licence application. You may then contact the AFM for the licence application via email to brexit_application@afm.nl.

A licence application can be submitted through the AFM Portal.

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If I submit a licence application now, will I get it before Brexit?

This is no longer possible. The AFM strives to process licence applications carefully and as quickly as possible. This depends on many factors, including the quality of the application, the response time of the applicant and the complexity of the application. Based on the legal administrative terms and the AFM's experience concerning the complexity of such applications, you must take into account a process time that will exceed legal administrative terms.

Information on submitting a licence application can be found on our website.

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What specific rules applying to remuneration policy in the Netherlands are relevant to financial enterprises applying for a licence in the Netherlands?

The rules applying to remuneration in the Netherlands are the European rules that apply in all EU Member States. The Netherlands has opted for a wider scope of the remuneration rules and a lower bonus ceiling than that stated in the European regulation for banks, investment firms, insurers and managers of collective investment schemes. The Dutch Remuneration Policy (Financial Enterprises) Act (Wet Beloningsbeleid Financiële Ondernemingen, or ‘Wbfo’) sets additional requirements for variable remuneration. These rules include the bonus ceiling, rules relating to retention payments, welcome and severance packages and publication obligations.

Notes

Bonus ceiling: bonuses for employees at Dutch financial enterprises may not exceed 20% of the fixed salary. The bonus ceiling in the European remuneration rules for banks and investment firms is 100% and only applies to what are known as ‘identified staff’.
Ban on guaranteed bonuses: a relatively high variable payment is undesirable if this is not in return for any or only limited performance within the business. There is therefore a prohibition applying to these guaranteed bonuses.

Strict conditions for severance packages: The severance payment for a director (a person in charge of day-to-day policy) may not exceed one year’s salary. Employers may not pay severance payments:

  1. if a person leaves voluntarily
  2. if a person has not performed their duties adequately (such as seriously culpable failure)
  3. to a director (a person in charge of day-to-day policy) when a company fails

Bonus clawback: The supervisory board of a financial enterprise may adjust or reclaim a bonus paid to a director. For instance, if the economic position of the company is weak or if the company has not achieved the objective for which the bonus was offered. The power to adjust or reclaim bonuses applies to all employees. In addition, adjustment or reclaim is mandatory if employees contravene professional standards or are responsible for large losses.

Possibilities for deviating from 20% bonus ceiling

  • Non-collective employment agreement exception: exception for employees not included in a collective employment agreement (CAO). These employees are subject to an average bonus ceiling of 20%, subject to none of the employees being able to receive a payment that exceeds 100% of their fixed annual salary.
  • Employment in another EEA Member State: the 100% bonus ceiling applies to persons who perform most of their duties in another Member State.
  • Employment outside the EEA: persons employed outside the EEA are also subject to the 100% bonus ceiling, but subject to approval by the shareholders may be awarded a variable remuneration of 200%.
  • International holding company: employees of a Dutch holding company that heads an international group are, subject to conditions, subject to a bonus ceiling of 100%.
  • Branch of bank or investment firm: the bonus ceiling of 20% does not apply to branches of banks and investment firms with registered offices in the EEA. 
  • Exempt institutions: managers of collective investment schemes, managers of undertakings for collective investment in transferable securities (UCITS) and traders who trade exclusively for their own account are exempt from the bonus ceiling. Traders who trade exclusively for their own account are obliged to qualify as a ‘local company’. 
  • Employee retention: lastly, an employee may be awarded a higher variable remuneration if the person in question is needed for a permanent change to the organisation and thus can be retained within the organisation (retention payment). This is subject to prior approval from the supervisor.

For questions regarding the remuneration rules applying in the Netherlands, send an email to brexit_Application@afm.nl.

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What happens to my European Passport after Brexit? Can I still offer services and/or products in The Netherlands?

From 1 January 2021, the rules of the EU will cease to apply in the UK. British financial institutions without a licence may no longer offer their services in the Netherlands from 1 January 2021. This can have consequences for their customers based in the Netherlands if British parties do not have a licence in the Netherlands. They have to discontinue their services.

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As an investment firm in the UK, I want to provide investment services in the Netherlands. Is this possible after Brexit?

From 1 January 2021, the rules of the EU will cease to apply in the UK. This means that you can no longer provide investment services in the Netherlands if you do not have an appropriate licence in an EU Member State.

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As an investment firm in the UK, can I continue to provide investment services in the Netherlands after Brexit on the basis of reverse solicitation?

The services you now provide in the Netherlands cannot be continued after 1 January 2021 unless you hold a licence in an EU Member State. Reverse solicitation, i.e. the offering of services exclusively at the client's own volition and without inducement, will not enable you to continue to provide your investment services. Only in very exceptional circumstances will reverse solicitation offer clients an opportunity to enter orders with a company established in the UK. This will need to be assessed on an order-by-order basis and must meet a set of strict conditions. You should also refer to the

Q&As published by the ESMA on this matter (Chapter 13).

ESMA issued a statement in January 2021 providing examples of practices that do not meet the conditions for reverse solicitation.

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I am a fund manager of an alternative investment fund with a license in the UK and I want to offer units or shares of the alternative investment funds I manage in the Netherlands. Is this possible after Brexit?

As of 1 January 2021 you are only allowed to offer units or shares in the alternative investment funds you manage to professional investors in the Netherlands or to manage Dutch alternative investment funds under the National Private Placement Regime (Article 42 AIFMD). Notifications can be submitted through the AFM portal.

If you make use of a European Passport in order to offer the alternative investment funds you manage in the Netherlands or to manage Dutch alternative investment funds, this passport has expired with effect from 1 January 2021. If you wish to continue to offer the alternative investment funds you manage in the Netherlands (for example, because there are already Dutch participants in the funds you manage) or if you wish to continue to manage Dutch alternative investment funds after 1 January 2021, you must submit a notification via the AFM portal under the National Private Placement Regime (Article 42 AIFMD). 

Under the National Private Placement Regime, offers may only be made to qualified investors. The offering of investment services as currently permitted with a European Passport (Article 33 AIFMD) is not permitted under the National Private Placement Regime.

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I am an insurance broker licensed in the UK and want to provide services in the Netherlands. Is this allowed after Brexit?

With effect from 2021, you will no longer be able to continue your services in the Netherlands on the basis of your licence from the UK.

In order to be able to continue your services, you must possess a licence from the AFM or another regulator within the European Economic Area (without the UK) with a (new) European passport for the Netherlands.

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